Several trading platforms are now struggling with the liquidity problem of cryptocurrency

A massive sell-off of digital assets in the industry from major exchanges and the fall of highly rated tokens like TerraUSD and Luna have triggered ripple effects in the crypto industry.

The recent wave of massive crypto liquidation has raised fears of contagion risks. Major DeFi lenders Celsius Network and Babel Finance have frozen withdrawals, and Three Arrows Capital, a major crypto hedge fund, is facing liquidity issues that have rattled investors.

Imminent Crypto Winter Sparked Mass Fears

bitcoin fell below $21,000 on Tuesday, extending the sharp declines from the previous day and sliding deeper into 18-month lows. According to reports from CoinMarketCap, the combined value of all digital tokens has dropped below $1 trillion early 2021.

“Events like last month’s UST peg break could happen again,” bear market analysts said.

Exchanges limit or stop withdrawals

Crypto Exchange Physical Futures CoinFlex declared he had halted all withdrawals from his platform, citing last week’s “extreme market conditions” and “looming uncertainty surrounding a counterparty”. The company claimed that Three Arrows Capital or any other loan company was not the counterparty.

Voyager Digital Ltd., a cryptocurrency broker and exchange, caps customer withdrawals from its platform at $10,000 and 20 trades per day.

The New York-based company disclosed the limits on its website after securing $485 million in lines of credit from Alameda Research the previous week to bolster the security of customer assets.

A cryptocurrency lender called Nexo announced that he had hired Citigroup Inc. to advise on potential acquisitions. Nexo has positioned itself as sheltered from the storms rocking decentralized finance.

In a June 22 blog post, the lender said it was seeking “best in class advice” from the bank, including on “liquidity restructuring arrangements”.

Celsius to received an unsolicited offer to buy its assets in response to rumors of an investor withdrawal freeze. One of Celsius’ well-known assets in the DeFi market is staked ether, a variant of the cryptocurrency ether that offers users rewards on their deposits.

Traveling through debt turmoil

Voyager, a cryptocurrency exchange site, revealed on Wednesday that it had loaned 3AC USDC and Bitcoin worth more than $650 million, which the latter may not be able to repay. This led to its withdrawal limits being reduced to $10,000 per day.

If 3AC does not repay USDC in total $25 million by this Friday and the remaining loan balance by June 27, Voyager said it will issue a notice of default. Since it was revealed that Voyager was exposed to 3AC, the company’s stock price fell about 55%.

Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency.

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Garland K. Long